Q3 2020 OncoCyte Corp Earnings Call

Greetings <unk> welcome to the Anthracite Corporation third quarter of 2020 earnings Conference call. At this time, all participants I'll listen only mode. A question and answer session will follow the formal presentation. If anyone should require operators to assist you in the conference. Please press star zero on your telephone keypad.

As a reminder, this conference just being recorded.

I would not like to turn the conference over to your host one Andrews C. E O Arco site. Please go ahead Sir.

Hi, This is actually before Ron starts this is Bob yet it from my side I'm going to be reading. The forward looking statement. Thank you Jerry and thank you to everyone for joining us for today's conference call to discuss Iqos sites.

Third quarter of 2020 financial results and reset operating highlights if you have not seen today's financial press release. Please visit the company's web site on the investors page.

Warren turning the call over to Ron Andrews accurate sites, President and C. E. L. I liked to remind you that during this conference call. The company will make projections and forward looking statements regarding future events any statements that are at historical facts are forward looking statements. We encourage you to review the company.

A SEC filings, including without limitation the companies forms 10-K, and 10-Q, which identify the specific risk factors that may cause actual results or events do differ materially from those described in these for that can statements.

Therefore, actual outcomes and resolve may differ materially from what is expressed or implied by these forward looking statements.

Site expressly disclaims any intent or obligation to update these forward looking statements, except as otherwise may be required under the law. Those prepared remarks, it's my pleasure to turn the call over there Ronnie Andrews C E O right.

Hey, Thanks, Bob and welcome everyone to our conference call to discuss our third quarter 2020 financial assaults and operating highlights do you want me today or Miss Levine, Our Chief Financial Officer Doctor Dog, Ross are cheap medical officer, and part of my son to our our senior Vice President of all things commercial will all be available at the end of our.

The end of our prepared remarks car a question and answer session.

We've made great strides in advancing our mission in the third quarter, having made the leap to becoming a commercial diagnostics company generating revenue, while also laying a strong foundation with multiple growth engines that together support our near term objectives and the companies long term growth trajectory, we have a lot to share.

For today. So we appreciate your patience today as I walk you through our strategy and share milestones and highlights of our tangible progress when each of our growth initiatives, which we believe position Arca site as a leader in oncology diagnostics with an immediate focus of lung cancer and immunotherapy diagnostics over the last 15.

Months, we've successfully transformed the company and establish for solid growth engines that each independently have the potential to drive the enterprise value beyond his current level and when combined create a dynamic value multiplier and large market opportunities. The market forces are in place to move immune and target.

Therapies to early stage diagnosis from their current used as a late stage salvage approach. Our vision is to facilitate the pap or pharmaceutical companies to transition their drugs to early stage utility burst for a lung cancer, followed by triple negative breast cancer and ultimately to become the immune therapy.

Ignostic company across all solid tumors and across all stages of cancer, while that may sound like a bold vision. The reality is that in the last five quarters. Since I started as a C. E. O. We've acquired are licensed the majority of the components, we need to execute on this mission, which we fully expect will build significant.

Cause value for our shareholders. The combined U S. Tam for the current menu of August type products and services as well over $6 billion and we're really moving rapidly deploy our offerings to secure a position and these large and growing markets importantly, our revenue growth combined with a recent operating.

Cost reduction and selective staff reductions should translate into lower cash needs this'll leave us remarkably well positioned to execute across all our programs today will give an update on each of our for business pillars that we put in place to drive our growth both now and for the future to.

How far newer investors the four products or services that make up our comprehensive offering are as follows first determined R X. The only commercially available treatment stratification test for early stage lung cancer second determine I O R gene expression profile test currently available for research used in.

[noise] predicting response to immune therapy drugs as well as the second generation targeted therapies that may overcome resistance to immune checkpoint inhibitors third they're a shoot their assure CNI monitor tests for immune therapy response monitoring that we are in licensing from chronic biomedical and.

Finally, our former services offering a suite of technologies that accelerate and Derisked biomarker driven clinical trials. It is important to know that want each of our products is it different timeframe to mature the final clinical revenue phase or form of services lab in our Nashville facility allows us to drive immediate revenue.

Road from across our product offerings in the research setting, particularly in clinical trials for drug development as we currently complete the process for commercialization into clinical use we've steadily executed across each of these four revenue engines with dedication and focus that enabled us to hit every milestone we laid out a year ago on <unk>.

Schedule, even with the challenging headwinds the COVID-19, pandemic and while we achieved several major milestones in the third quarter. Nonreligious, then gaming final CMS reverse reimbursement for determined Rx, which led to our initial quarter of clinical revenues for the company as a reminder, determined.

This is the first and only predictive test for the identification of patience with stage one to do a non squamous non small cell lung cancer, who are at high risk for recurrence falling surgery surgery. Unfortunately more than half of the early stage patients who receive supposedly curative surgery will have a recurrence.

Rx addresses the critical unmet need for identifying early stage lung cancer patients, who have a high likelihood of recurrence.

We've made incredible progress would determine Rx since our launch in late January and once again achieve several highly significant milestones during the third quarter first we announced the final Medicare coverage determination, which secure national Medicare payment Bird a terminal Rx. This is a significant milestone as men.

To care patients account for approximately 70% of eligible patients nationwide and while securing nationwide medical coverage is a monumental achievement in its own right. It is significant to note that the coverage policy also established a new class of predictive tests for Medicare coverage based are compelling clinical evidence, which now cause.

This is determined Rx as the first and today only test in the class for early stage non small cell lung cancer.

On top of this we also received a final pricing decision for our tests from the centers for Medicare Medicare and Medicaid services with pricing in line with comparable high value molecular test and oncology. These milestones in combination with payment from private payers, such as anthem, which is the Blue Cross and Blue Shield plans for California.

Positions determined Rx for rapid adoption, which of course brings me to the great tracks and we've experienced in commercial adoption and test growth in Q3 R testing volume more than doubled from Q2, two 175 billable patient samples. In addition, we maintained our position reorder.

Approximately 60%, which we believe reflects a high level positions satisfaction and clearly didn't demonstrates the clinical utility in value. This test springs to patients and doctors and guiding treatment decisions for early stage lung cancer.

We now have successfully onboard additional hospitals and by the end of cute three we had 67 onboard at hospitals, which excitingly includes prestige prestigious national comprehensive cancer centers and National Cancer Institute centers. We're also seeing increase adoption that major health care systems, including a.

C. A health care cancer treatment centers of America, Florida cancer specialist scripts health in Providence Cancer Institute.

While we continue to be very encouraged with the volume growth and new account Onboarding. It is important to note, though fourth quarters typically a slower core for surgeries since patients traditionally have not wanted to be in the hospital during Thanksgiving and Christmas holiday season, So even though our sales team continues to close new business when we come by the impact of the holidays.

And the growing increase in Kobe, two cases nationally, we're not projecting another quarter of doubling of our volumes in queue for.

Global markets also represent a large market opportunity for us in in third quarter, we were able to expand our international distribution by adding cryonics biomedical for Germany, and gin cell in Mexico, Colombia in Brazil. In addition, we continue to explore relationship with potential partners in China, the world's largest.

Market market opportunity in terms of total patients.

Important, though that we get the right deal structure in this important market and fill we made solid progress towards finding the right partner so stay tuned and finally, let's touch upon important data recently presented at this year's I E. S. L. C Twenty-twenty North American conference on lung cancer here, we present, a new perspective.

Data that build upon our prior results demonstrating that determined Rx informed treatment significantly improves lung cancer patient survival. It is this compelling data that will continue to drive the success of determined Rx.

The benefits abusing determine R X a clear to patients and their doctors are test is able to identify the early stage lung cancer patients that may benefit from chemotherapy post surgery to prevent recurring disease, which will lead to significantly improve survival.

But our research is not stopping there. We're also working to better understand how to leverage the power of the term Rx with other available molecular diagnostic tests that drive decisions for their selection of targeted therapy for instance, at this past summer's ASKO meeting a large pharma company presented data is showing a subset of patients who benefit.

From a drug targeted at the E. G. F. R pathway, which is one of the main drivers a certain types of lung cancer if.

If you've been following Bianca site story for the past year, you've heard us talk about how targeted an immune therapies are moving upstream to manage early stage tumors remember today. The majority of treatments are only indicated for late stage salvage treatment versus earlier stages. When there's more hope for either management is.

A chronic disease or even in some cases a cure.

This movement in the earlier stages is exactly why Omphacite strategy is focused on owning the early stage diagnostic in therapy selection decisions and lung cancer and ultimately we believe across solid tumors and.

In a rapid response of this exciting data from Astrazeneca. We now have data that show combining determine rx with Egfr mutation status may inform optimal treatment strategies for lung cancer patients who are egfr mutation positive.

Approximately 30% of these Egfr mutation positive patients are also deemed high risk by determined Rx and may benefit from additional chemotherapy based on a study results. We made the decision to now offer Egfr mutation testing in conjunction with the term Rx all from a single P.

<unk> sample to provide an integrated solution for patients and physicians. This is a powerful clinical extension of determined Rx, which we expect will drive another revenue stream for this test.

Overall in less than a year, we've demonstrated incredible progress having gone from gaining access to the test from razor genomics to a global commercial launch yielding a solid growth trajectory that includes the establishment of a new class of molecular test, we look forward to advancing determine rx towards standard of care for early stage lung cancer and.

We believe are clinical benefit and the significantly improve survival rates support such adoption. We're extremely proud of our team's efforts to build a solid foundation with our first growth engine, which providing immediate and increasing revenue to support our continued growth as a company as well as saving many lives.

And now like the transition to our second and third growth engines term, Ohio and that their assures CNI monitor test, which together have the potential to position August site to offer the first and only comprehensive solution for immunotherapy treatments selection and response monitoring.

While introduction of Immunotherapies has been transformative in oncology. The fact remains that the majority of patients will not respond to these drugs normal they gain a sustained response and will eventually relapse determine io has a huge opportunity to change this dynamic and here's how.

Two major challenges in the area are one identifying patients that respond immune therapy or second generation therapeutics in combination with immune therapy and to assessing their response to treatment B, a noninvasive blood based monitoring to facilitate the prompt treatment change if we can identify the right therapy.

For the right patients at diagnosis, we have the potential to treat patients maintain their sensitivity to treatment and detect and overcome resistance, which ultimately will maximize benefit for patients by unlocking the full potential of this powerful and important class of drugs.

The immunotherapy market is substantial with an estimated 750000 patients potentially eligible for I mean therapy and the United States. In addition to the nearly 5000 ongoing clinical trials evaluating these drugs.

And this opportunity will continue to grow with estimates from Grandview research that the I O immune therapy market will reach approximately $130 billion or 2026, and the adjacent testing market to identify the most appropriate therapy patients will grow to over $3 billion.

Within the same time period.

While this is a huge market tools for response predictions are lacking there's no biomarker panel currently available that is powerful enough to accurately identify patients who will have a sustained response versus patients who require either common toil therapy are totally different approach tests that are currently used dislike <unk>.

<unk> for immune therapy are not able to reliably predict complete responders from partial Enron nonresponsive.

So if you consider the current treatment response rates at around 45% at the upper end of the response range. This means well over $60 billion. We spin on treatments per year that will never provide patient benefit we can do better and we believe that determine I owe is uniquely positioned to play a role.

And more effective use of immune therapy, and an improvement a patient outcomes.

The term I O R proprietary gene expression profile test evaluate the entire immune microenvironment and biopsies from cancer patients to identify what the industry now calls hot tumors, which are Kansas likely to respond to check pointing me that therapy, such as Keytruda and Ah Devo and unlike current test.

Determine I was also able to identify early in the diagnostic process, the negative or cold tumors, which will not respond a checkpoint inhibitor monotherapy and will require second generation targeted therapy in combination with the immune checkpoint inhibitors in order to benefit the patient we bill.

Leave that these biological mechanisms, which determine identifies are not only effective in lung cancer, but also broadly applicable to all solid tumors. The term Io is the first predictive tests for clinical trials that assesses the comprehensive molecular biology of the tumor and today outperform measures of any singer.

<unk> component alone.

Based on this capability, we were thrilled to announce an immune therapy biomarker collaboration with a leading research Institute in Milan for an investigator sponsored trial to evaluate determine I O as a biomarker of Neoax event checkpoint inhibitor response, and triple negative breast cancer considered to be the most deadly.

Form a breast cancer. This is a meaningful accomplishment as we believe this collaboration has the potential to drive patient selection and the new address setting where PDL, one I see Belle to sufficiently identifiers monitors and may enable the accurate application of immune therapy in this very challenging indication.

This collaboration is also important as it generates near term pharmacy services revenue Bronco site and also May help facilitate a path of the clinical launch of determined I O.

Determine Ohio is a huge part of the immune therapy diagnostic story, but the need to monitor for resistance remains an important unmet need and that's where our licensing in collaboration agreement with chronic biomedical for that they're assure CNI monitor test comes in this as a patented blood based tests that users copy number instability.

<unk> R C&I for immunotherapy response monitoring with.

With response monitoring physicians can catch a tumor that is becoming resistant to treatment and then change treatment of second generation therapy, or even a commodore he'll therapy that will prevent disease progression and improve the patient's chance for disease free survival.

We ought by operating both determine Io and therapy monitoring test acre site will differentiate itself, but being the first and only company to provide a comprehensive solution that address is two of the biggest outstanding challenges in the field of immune therapy were incredibly excited to continue to mature immune therapy offerings and bleed these too.

New test applications, working together are a powerful and compelling opportunity first and the farmer trial setting and eventually we hope in the clinic to support our immediate and long term revenue objectives. Our plan is to complete tech transfer and launched the test for research used an immune therapy clinical trials during Q1 of 2021.

So more to calm on this exciting addition to our product menu and finally coming to our fourth revenue engine are very successful boutique pharma services business are farmers services lab is an important revenue source that is rapidly growing with numerous contracts with pharmaceutical companies, both large and small.

As well as major molecular diagnostic companies.

And while the final form of services revenue recognition in 2020 depends on how fast we complete the various milestones are the speed at which former partners enrolled patients and collect samples I can say that in a just a few months. This business has tremendous velocity. We believe we are just starting to scratch the surface of this opportunity and and <unk>.

2021, we expected to generate operating cash, which will help reduce our cash usage in the future, but delivering resources to fund other growth areas along with the term of Rx Our farm of services provided immediate and growing revenue engine, which support our operations.

So when you put it all together, it's clear that we've made remarkable progress executing across all of our programs. While also laying a solid foundation with multiple strategic growth engines, creating a robust portfolio to generate immediate revenue to support our operations as we work to achieve our long term goal delivering significant.

Enterprise value to our stakeholders and our shareholders. We've come a long way in just the last five quarters, which we believe is a testament to the dedication of our team the power of our approach and the value of our test and services to provide patients physicians.

Partners and payers with additional resources to manage their patients.

Where I turn the call over to Mitch for review of our financials I Wanna take a moment, though and thank the entire <unk> team for their continued dedication and hard work in a very unprecedented environment.

To ensure we stay on track with each of our strategic initiatives.

I hope that after today's call yours confident in August site strategic platformers, I am and I. Thank you for your support and for your confidence now I'd like to turn the call over to missiles mean for review of the financials Mitch.

Thanks for Tony Hey, everybody.

To start as of September 30th 2020, we had cash cash equivalents and marketable securities of $10.7 million.

Before I discuss our operating results I'd like to update our investors about our revenue recognition policies around determined oreck.

In light of the recent CMS and Meridian pricing decision, which became effective in September we were able to recognize revenues for Medicare covered tests on an accrual basis. When the tests are performed rather than on a cash basis.

We're all health care payers other than Medicare that is private healthcare plan, we recognize revenue revenue on a cash basis for determining Rx tests.

In the future, we will be able to recognize revenues on an accrual basis for the determine Rx test once we have contracts reimbursement in place with those plans in accordance with U S accounting principles.

In addition from a standpoint of course, we will incur and a crew cost of revenues and other operating expenses for all farm the services and the term Rx tests, we perform.

For the third quarter of 2020, we reported a net loss of six $8 million or 10 cents per share.

As compared to $5.2 million or 10 cents per share for the third quarter of 2019.

Operating losses as reported for the third quarter of 2000 $26.2 million, an increase of $900000 as compared to $5.3 million in the third quarter of 2019.

Operating losses, as adjusted or $6.1 million for the quarter, an increase of $2 million from $4.1 million in the third quarter of 2019.

We have provided a reconciliation between gap and non-GAAP operating losses in the financial tables, including with our earn included with our earnings release, which we believe is helpful in understanding our ongoing operations.

Revenues for the three and nine months ended September 30th 2024, or $555000 and $713000, respectively generated from farm the services and the term Rx tests.

Cost of revenues for the three of nine months and it's September 30th 2020, where approximately $601000 and $1.1 million respectively.

It is important to note here that as we ramp up our sample volumes, we will expect to see an improvement in our gross margins and future quarters for the term Rx.

Moreover.

And as mentioned previously we expect our pharma services business from our National lab to be accretive to our P&L. In 2021 is that business unit benefit from increased scale that will come from higher project volume, we can see in a contracted pipeline.

Research and development expenses for the third quarter of 2000 $22.6 million.

As compared to $1.6 million for the third quarter of 2019 and increase of $1 million.

The increase was primarily attributable to personnel and related expenses, including the stock based compensation expense increase of $300000.

Management made the tough decision to reduce our operating expenses starting in the third quarter with a partial reduction enforced plan and agreements to reduce salaries, which we instituted in September 2020.

Personnel and related expenses for the current quarter also include a $400000 severance charge and $200000 an accelerated stock based compensation expense related to these proactive decisions.

As you know the stock based compensation expenses are non-cash.

General and administrative expenses for the third quarter of 2000 $25 million as compared to $3 million for the same period in 2019 and increase of $2 million.

The increase was primarily comprised of $2.2 million and personnel and related expenses, including stock based compensation expense.

Due to the actions I mentioned earlier personnel and related expenses for the quarter include a $900000 severance charge and $500000 an accelerated stock based.

Decision expense.

Sales and marketing expenses for the second quarter $1.6 million.

As compared to about $630000.

For the same period last year, an increase of just under $1 million. This.

This increase was primarily attributable to personnel and related expenses for continued ramp up in sales and marketing activities for commercialization of determined Rx.

Cash used in operations was $6 million for the third quarter of 2020, which includes about $900000 and transactional another business development related expenses.

That concludes my remarks concerning our financial highlights.

Like to call turn the call back to Ronnie.

Mitch operator, we'd now like to open the call for Q&A is that concludes our prepared statements.

Thank you at this time will be conducting a question and answer session. If you'd like to ask a question. Please buzz star one on your telephone keypad confirmation total indicate that you're lying as in the question Q U me first star too if you'd like to remove your question from the cute.

Poor participants using speaker.

It may be necessary to pick up your handset before pressing the star keys, one moment, please while we pull for questions.

The first question is from Mark Macero B T. I G. Please go ahead Sir.

Hey, guys. Congrats on a strong quarter, I guess with determined Rx starting to ramp up.

Really strong growth in billable samples.

The number of hospitals.

Is also increasing nicely.

You read out some really compelling perspective data showing.

You know 90, 90%.

Disease free survival rates at five years for high risk patients with chemo can you just give us a sense for.

The funnel that you have as we exit Q3.

What types of trends you saw maybe in October and.

A related question is you said that you don't expect determined Rx volumes to double in queue for due to the holiday season, but can you help me understand you know the funnel.

You know what do you think it would look like if there were no holidays.

Yeah, Hey, Mark Thanks for the question first off let me just say that we continue to onboard new accounts, we continue to execute R. Virtual if you remember we've got a really thorough series of virtual web.

Webb Webinars as we like to call them with some of the leaders in our industry and lung cancer and those continue we continue to see new hospitals on boarded and we continue to bring in new physicians into the fold.

Or hesitation in queue for us, it's just too early to tell what Thanksgiving Christmas combined with Kobe to increase is going to actually do right. Now I mean, obviously, we're hopeful that these new accounts that we bring in in queue for will continue to move us towards doubling again, but I just didn't want as you guys creature models to antique.

<unk> that we would be able to do that one important note, though is that in choose three our revenues included 61 recognize patients.

And as you might imagine we have quite a few patients in Q2 and Q3 that we had accumulated more than that so the $219000 in revenue was for 61 patients. So we do expect that our revenues will grow in queue for but some of that will come from the from the patient.

That we actually tested in Lake Q3 are from patients that were tested before we got our final pricing, which we are now adjudicating. So it is very plausible that will continue to see revenue growth in queue for I, just don't know of our volumes will be able to double given the holidays and COVID-19.

Okay, and just as a housekeeping question was the entirety of your revenue in the quarter due to determine Rx or was there some.

Services business in there and can you.

Quantify that yeah.

$219000 of the total was from Rx the rest was from our form of services business.

Got it that's helpful. And then I think in your press release, you talked about $2 million of committed projects and the farmer services business.

Correct.

For 2020 can you help us bridge.

200.

Thousand of that coming in Q3.

Should we think of that as maybe a backlog rather than you know.

Penciling in.

The balance of that so that's like $1.8 million for Q4.

Is that more of a backlog number than it is in near term exactly yes, Mark exactly we get these contracts. These contracts typically extend over a year or so and so we are able to so if it's a million dollar contract or 500000 Con dollar contract. We can only recognized the milestones we achieve within a given quarter and.

Or if it's an actual trial, we can only bill for the patients we actually tested within that quarter. So as you know from your your.

History in this industry pharma revenues are lumpy.

But we do like to project the pipelines so that our investors will know that we do have a growing pipeline a business and that that pipeline does give us a sustained revenue strength over the coming quarters based on our ability to achieve milestones and complete patient test.

That's terrific and then another one for me you talked about anthem Blue Cross Blue Shield in California for a determined Rx obviously Medicare.

Can you speak to the conversations you are having with additional health plans.

I think he might have mentioned cigna.

In the past, but how should we think about new commercial health plans coming on in the next couple of quarters.

I have partners Sundahl here, who is on top of all that so partner why don't you out for some color commentary tomorrow. So yeah happy to do that so on the one hand, I mean anthem Blue Cross Blue Shield is just one example, so we have been connecting payment from multiple commission painted and sometimes even Atlas price. So that's happy.

Simultaneously, we have a good sense now for blacktop.

And then in discussions with several of them to get in network.

And so one of the positive elements in those discussions is because he had P. M. S coverage and we have a high value price.

And then as a song health economic models, showing benefit plan those discussions ethylene quite well and we hope to be able to report on getting in contractor in network with some of them over the course of the next month.

That's great and then final question for me on first or the.

CNI monitoring test you talked about looking to complete the tech transfer and launching for our <unk> in Q1 of 21.

Across a range of cancer is the.

The first part is should we think of this as across all solid tumors or are there are also some he malignancies and then secondly can.

Can you walk us through the dynamics of this license.

So if you complete the tech transfer.

You'd be able to realize all the money off of these tests are do you have to split it with your partner.

Yeah, So I'm gonna take the first part and then I'll, let Doctor Ross Sorta handle the.

That the.

Sort of the strategy around C&I and how it plays in so the license itself is a license to the test.

And to the IP surrounding the tests were were interested in and certainly enthusiastic about the intellectual property that comes with it. Some of this intellectual property has very early dating in the world of blood based testing for cancer as well as for transplant. So we're eager to to work with our friends it chronic too.

Understand how we might build upon that pattern. The state. So that we have a representative play in the world of therapy monitoring, but also in the world of M. R. D. So, but with that Doug you Wanna walk through sort of the timing is Q1 to Q2, and then we'll be going out to get in and began to offer. This is part of our trial menu. So.

Yeah. So.

We're gonna be transferring over to our lives over here in Q1, and Q2, but the test is up and running as well mechanics lab in Germany.

And so both of those can offer it here in the U S. Obviously on over there for you per Europe in terms of the tissue types that it's appropriate for so as opposed to most of the stuff. That's out. There. This is a test that focuses on copy number variation as opposed to mutations in the real distinction there is that.

As opposed to some of the other things on the market. It does not require you to.

Sequence the tumor either whole exome or in some cases whole genome in order to identify the subset of of mutations that you're going to go. After so we can use this on any tumor tie that have copy number variation our focus in the early days is on long. It's one of the tumors with the highest amount of copy number variation. So it's.

Great candidate, but in fact, most solid tumor types have a tremendous amount of copy number variation. So in principle. It's it's it's a candidate for any of those but our our early days, they're going to be focused on therapeutic monitoring in lung cancer.

That you're therapeutic monitoring is observing weather.

The tumor load in the blood goes up or down following the initiation of therapy. If it goes down in the therapy is working but if it starts going up that means the therapy is not working and you should be switching to a next generation agent or others salvage strategies and so that's our focus starting among but obviously.

A candidate for also a tumor types all of which have.

Prominent copy number variation.

The next question is from Paul Night Keybanc. Please go ahead Sir.

Hi, Ryan could you just talk to the.

The level of the type of patient in the third quarter was that.

The profile of 70% CMS payers I guess from the reimbursement level. It was not could you talk to that.

Yeah, I think about while her partner you've apartments here with me. She can answer that specifically, so yeah, I think and the numbers you see reflect that log in the payment.

At the two Medicare categories, if you combine Medicare and Medicaid advantage. These are people who have the private Medicare advantage plan by anal Medicaid advantage has to pay chest like many can so when you combine the two is about 16% now right in line with the 70% so.

And that's what we're seeing in the train and so sometimes I think that the lag.

Between when the cases it comes in the door and the building and then the subsequent payments. So those payments will come in the near future. All your your point is a good one though that if you think about those 61 pace.

Patients, we actually recognize revenue on for $290000 you guys have already beat beat me to the math, that's about 35, almost $3600 a patient so some of that but some of those patients that were not Medicare or Medicare advantage actually we got paid at list price, which actually helped us improve our.

For the for the test.

Got it and then you had mentioned 67 hospitals at the end of the third quarter, what was that total at the end of two Q.

Oh Gosh I haven't tried and true bottom is going to look it up she has it right in front of her England 36 36.

Okay, and your Salesforce count where are you with that now versus earlier in the year.

Yeah, it's the same Paul but we now have really because of the virtual world that parliament team and so so well with given the pandemic, we've actually penetrated some areas of the country that we don't have cells representation in today. So you will see us add another three to four wraps as we exit this.

Sure and head into next year, because these are areas that once we start to pick up prominent hospital systems, we want to have cells representations, because we can piggy back off of those placements Bob anything completely agree. So we have even with the virtually events.

In many high bond noon states at large one you must be the only station Kansas on getting something so we want to add sales reps, who can go now and penetrate deeper into those accounts.

Most physicians and get Monty Pete Alright, So that's that's a strategy.

What.

What will be the.

Once the expected reduction in cash burn in Q4 with the steps you've taken.

Hi, Paul Smith, So we have a modest reduction and burn in queue for but it's going to accelerate over time is severance is paid and exhausted.

Okay alright, thank you.

Thank you Paul Paul Great to hear you again.

We have a question from Steve Unger need them. Please go ahead Sir.

Great. Thanks, Congrats on the progress looks like the portfolios really really coming together.

First question I wanted to understand now that you've got real commercial experience with determined Rx.

Who who is the primary ordering physician is it is it the surgeon or or the oncologist.

Yeah and Tommy.

Oh, I'm doing it over and Xs towards the surgeon.

The auditing physician.

However, the way the market. They also bring the oncologist into the mix in terms of a decision to use the test because it's the oncologists who makes the decision on the chemotherapy maybe are finding that it's a surgeon who is largely placing me on that.

Okay, and then me, it's up to the oncologist to determine.

The level of room upstairs.

Response, okay. So the way.

No risk.

The oncologist doesn't even get this afternoon in most cases, because they have watched by the surgeons you have some maintenance strategy, Indiana high risk than the patient exactly for the medical oncologist, whose name makes the decision to get chemo.

Great and that appears to be an easier sales contact and a surgeon rather than an oncologist and I was just wondering at this point as far as that that group of individuals.

What do you think your exposure has been as far as marketing.

Either with reps or the virtual platform.

Yeah, I think we've done remarkably well for the first yellow we've.

No one had several thousand people download.

<unk>.

Including several synergen's.

So and that's the reason we weren't able to can't use 67 hospitals onboard getting Q T. But I do think our work continues and that's exactly why we need to continue to a nurse in physician education effects next Tina and added targeted number of rats, we're actually able to now have some things to say his engagement surgeons.

I'm supposed to be continued a message Steve you're probably as you followed this industry for awhile. If you look at the success of Oncotype D X in their early days. It really was this sort of multiplicate multiple.

Multiplication effect of a rep getting a cow him telling an account they start to go out and educate the next account and we know we're in the early days of this still which is why we want to build some further cells critical mass because.

R R virtual capabilities really really to be honest I knew we were good but.

It's been surprising as to how how much uptake they've had but I still think as we exit sore. This world of Covid and we started to get back to face to face a lot of this is still hand to hand education hand to hand combat. If you will so the combination of the two we've touched well or 2500 healthcare professionals today.

Since Covid started so we feel good about where we are but we still got a long way to go.

Great and then.

As far as billing is concerned yeah, great job is getting a 330 500 3600.

Many per test.

And it looks to me like you you have about 400000, then for me to 175 billable test to recognize overtime.

And when when I look into the fourth quarter. For example are you expecting the level of billable tests to be at least.

61, so they have.

Either a similar mix or.

How does that.

Or would that mix percentage go higher.

Given the status of now.

Quite at the beginning of the quarter that you had.

Yeah, Let me leave yet it's a great question and we don't want to be as transparent and clear as we can while we were able to do in Q3 was the date, we got the pricing everything post that date, we were able to bill and collect four and recognize everything prior to that date, which is over 100 patients weird Judicative now.

We believe there's a high percentage of those patients will be paid because they were after the actual date, where we received our coverage decision, but we're before the pricing decisions. So that gap in time, we should not be penalized for we really won't know till we get those payments, but we expect that that some of that will come in and if you do the math, it's a little over three.

A thousand dollars being adjudicated and that's just from Q3 that doesn't include anything will pick up in queue for and we do expect Medicare.

Tony collage and our chief accounting officers in here. So I believe we're expecting 30 day or less.

Payment cycle for Medicare correct. So so as you got to start thinking about your model. Steve. We do think that will get paid ultimately will always have a carryover from one quarter of the other based on tests that are done late in the quarter, but this first quarter revenues a little clunky because we have these tests that were before our pricing decision that where do.

<unk> and we're not ready to call victory yet and.

There's a slight.

If I made Medicaid advantage like I said before by law, you have to pay and you have to pay the same price and some of the Medicare advantage plan.

Then Medicare.

Is coming attention being suddenly I'm, having to do a little bit of a theme to get that payment and that's another thing, but we will get those vindicated yeah. Ultimately this'll all start rolling together in in the first quarter still little little Conkey, given that sort of this a nuance of the pricing date versus the positive coverage decision date.

Great and then.

On the subject of getting paid it's my understanding that the the trial in Milan is.

As revenue generating and I was wondering if there was some color you could provide us to sort of a landlord the duration of that project and perhaps maybe extreme it if you can as far as overall revenue contribution.

Yes, the first phase of the trial that we are annually now is will be a per patient.

Fee that they will pay us and we're expecting Bob got to be somewhere between 250 and $400000 in revenue that should take place over to the next two quarters. So that'll come in over the next two quarters assuming success in a solid publication. Then then we'll be moving to what we hope will be the.

The next round of perspective potential CTX opportunities, but that's yet to be determined if that happened as you know see that will take a couple of years to actually fulfill but will be paid across that time for the patients we do but the current phase.

Should complete by the end of Q1 early Q2 at the latest.

That's excellent and then as.

As far as determine Io is concerned it's cheetah gene expression test and there are many that are many ways I guess to go after the tumor microenvironment and I was curious as to.

And and maybe.

Not so much detail, but in a high level uhm what is your competitive pitch for determent.

Versus the use of Ngf's technologies for tumor profiling.

Well I'm Gonna I'm Gonna give you the high level pitch, because that's what I can only give I'm glad doctor Roscoe a little deeper than me, though I mean, the reality is in order to provide access to patients globally to these emerging therapies you need to be able to democratize. This test you need to be able to do it especially in long on bond needle aspirates, which means you're not going to have <unk>.

Yes to large amounts of tissue and you need to do it in a cost effective manner with rapid turnaround time, and so by doing what we Don of taking a 2000 gene on supervised classifier, taking relevant Rnas from the various components of the microenvironment and synthesizing those into a 2017 PCR panel.

We are able to accomplish all the things that today or unmet by nexgen sequencing, but Doug in terms of the actual.

Immune hot versus immune cold in our differentiation between two mutational burden, maybe a little bit of color commentary on what what we do is differentiated from TMV yeah.

Yeah. So it's a it's a great question because a lot of folks who've gone after gene expression profiles that attempted predict outcomes with checkpoint inhibitors with with modest outcomes frankly, and what we believe makes this different is that we're not only immigrating information on the positive side the subset of genes that are in infiltrating.

Lucas Nathan amount of work Belgian the tumor that make the tumor sort of poised to respond to checkpoint inhibitors.

Counterbalancing that with a negative signal that comes from the wound response around the tumor the the tumor Kansas associated fire Pyroblast forgive a repressive signal to the tumor we think the combination of the positive signal in the negative signal is much more powerful we've actually done that experiment and you cannot.

Get the same information out of the positive signal alone or the negative signal alone. It requires both it's probably both biology and frankly, there's some redundancy there so when you're in the real world. When you do this testing you get really poor sample their needle biopsies, who knows what fraction of the tumor they feel.

People and so the sampling error is a big problem with diagnostic assays like this because we're getting signal both from the positive side and the negative side. The algorithm can combine those to deliver and accurate result, more often so we think it's a combination of those that make this more effective.

Regardless competing markers out there PDL one has been very controversial because there's a lot of different antibodies that are used in different ways and just IAC have a number of problems, but make it a challenging biomarker tumor mutation burden is clearly real biology again, the method of analyzing it the way of.

Counting mutation so forth has been non standardized the interesting thing, though is that at least in the data that we have so far it looks like the term I owe her tumor mutation burden may in fact add together to be even more information than either one alone. So to the degree that to remediate mutation works it works better in conjunction with <unk>.

Great and then if I could just add one more C D on adding on as far as Egfr is concerned as far as adding targeted treatment within early stage lung cancer patients what needs to happen for you to start getting reimbursed I understand.

That EEG R. F R testing.

Is reimbursed, but this needs to be a labeling change for the product.

Not at all what we'll do is add Egfr as a second test. So the Doc will order determine Rx and Egfr will run them, both and we'll build in both as separate separate bills.

Existing CPT codes for EGF rebuild nose and that's all that's needed.

Excellent. Thank you.

Thank you Steve.

We have a question from Stephen Mop Piper Sandler. Please go ahead Sir.

Oh, great. Thank you guys. Congrats on the on the tracks and you guys are getting.

Thanks, you too thanks, Steve.

So quick question, so and most of my questions have been answered by the by the group, but just just a couple but on the 60% reorder rate of physicians for determine Rx.

Is that in line with your expectations given the early stages of launch an and had actually do define the reorder right because.

I can see it contained maybe essentially some surgeons may not have candidates or those counted again, even though they didn't have actual candidates. So therefore they couldn't.

Prescribed H M O X men, maybe just a little bit more color on that.

Right question, Steve Yeah, I mean, the 60% as well ahead of and the only comparable we have really is oncotype dx in its early years in their first couple of years, they got about 30% to 40% in the academic world in less than 10% in the community. So if you average it out they were in the thirties and we're in the sixties.

And we're across the community, which typically is the hardest group to bring on board. So we're very encouraged by that.

We also know that the way we counted is if they haven't we ordered in a certain period of time that they are deemed not to have reorder, but to your point. This is a smaller market opportunity than oncotype that may be an unfair.

Metric for us to look at in terms of determining the percentage. So we'll continue to monitor it but right now 60% is a really good number for us and to your point it could be higher than that given that we have surgeons adult see these low risk page are these are early stage patients as often one trend that we've noted this to the.

<unk> that that performing the surgery that quite satisfied with the result.

They come back wait a minute and the next Guinea and then the ZIP on patients in order to attempt to your point I'm not all of these surgeons do they highborn noon and so if they don't come back quite a while and we go we do go back and our sales reps at it's usually because they haven't done that's actually not because.

You've done this engineered.

That makes sense.

And got it.

Maybe just a follow up on.

Some of your surgeons that that are reordering can you give us a sense of how many they're they're giving in the quarter and yeah. I appreciate it sorta early stages, but.

Or is this like two or three or.

Yeah, given the volume there's only about 40 to 45000 patients a year in this space and given that we have six reps and basically six territories, but with the virtual capabilities pop.

I don't really know off the top of your head, but they're not doing 10 or 20 of these a quarter, they're doing to your 0.3 to four a quarter typically when you get to the academic centers or I'm, sorry, when you get to these larger community networks will see more but the academic centers don't see as many because they see more late stage salvage treatment type patients.

Okay, Great. Yeah, that's that's useful and then on determined Rx yeah on the on the distributor side. You know you have you have you have chronic from Germany and many of your Latin America distributors into remember you guys were also intending to go in to China and you mentioned.

That early in your prepared remarks, but.

And you have to get the right deal, but we're.

We're talking about like months or 12, 12 months or can you give us a sense for Friday.

Yeah, I would just say conservatively I think if you stay tuned you'll see something over the coming few months. We have we've been very close but it's important is you know it's a large market and we have to make sure given some of the intricacies of the Chinese market and some.

The pattern slash IP protections that you don't typically get when you go into that market. We have to be careful that we don't see parallel trade in these tests come back to us. So the negotiations of those causes become pretty important but I do think we're very very closely.

Okay, Great. That's helpful. And then my last one switching gears over to determine I Oh I also remember you guys mentioned that you were planning to go X you us using <unk> and <unk>.

And then you can get that pickup data.

Yeah, we have we have we now have numerous potential.

Potential suitors for for the PCR version of the tests I. Thank you everyone knows we can wanted to need their RNA seek or we can run it in the PCR version, given farmers need for distribution and a democratized networks to get patients globally onboard it to their drug we do.

To see increased interest.

Our decision right now to be honesty, just be totally transparent is do we pick one and we rod one or do we try to be Switzerland, and just kid our product on our own and sell it across the 10000, plus PCR instruments that exist in Europe, and the parts of Asia, where where we want to go so.

We're in the definitely deep discussions around that but those interest in and we are we are eager to see mark This kit before the IBD our regulations hit Europe.

And start to become part of that regulatory challenge, which will be sometime late next year. So we're gonna you'll you'll hear more about that as we enter Q1 more than likely.

Okay, great. Thank you.

We have a question from Bruce Jackson Benchmark Company. Please go ahead Sir.

Hi, Thank you for taking my question.

Looking at he also talking about determine I O and getting it from a research you suddenly tests to a clinical test you've got this stuff.

Study Youre doing right now, it's send that to you and and Nicole Angelo in Italy is that gonna get you enough data to to get this thing to a clinical test or do you think you might need some more data yes.

Yeah, we're going to need more data, but we didn't want to talk a lot about it but we have a full court press on multiple sources of retrospective samples dark do you want to comment on some of the activities there and just the critical mass that we were gaining there yeah. So.

The the Milan study as you say is a really important study in a new indication to get new adjuvant.

Checkpoint inhibitor therapy, and a triple negative breast cancer and depending upon the results. We think we could play a major role there, but that's obviously very associated with the drug in the trial and so.

We will see what how those results come out in terms of in general getting this to market. Obviously, the biggest market for checkpoint inhibitors with lung cancer and right now to be candid patients are accessing those drugs in a biomarker independent way, although they came out associated mostly with P. D O one standing in fact.

Evolved that if you've got a late stage lung cancer, you can find a way to get access to the drugs and that's obviously not optimizing.

The use of those drugs in terms of both their benefit their side effects on their cost us so.

The guidance that we've been given by the reimbursement folks is that if we can demonstrate convincingly that we're adding incremental information that will help make what is a very difficult decision as to whether or not to use and checkpoint inhibitor alone at checkpoint inhibitor combined with a cytotoxic age.

Or perhaps some other approach given how sick these folks are and how toxic cytotoxic therapy as well as the side effects of immune therapy. If we have robust incremental information we feel that we can get reimbursed. So is Ronnie says, we're putting together retrospective cohort.

That will allow us to demonstrate our performance relative to PDL, one as well as schwimmer mutation burden when that's relevant.

And our plan is to assemble that data and ticket for reimbursement.

Regardless of our other efforts in both companion and complimentary diagnostics. So Bruce really we're on target now to try to have all of that data by the.

Middle of Q2 with the idea that once we have that will go to market in Q3 with the term Io for clinical use as well as we will be bringing up as you might imagine that targeted panel because the current clinical requirements are to run both targeted panel for targeted therapies decision.

<unk> Nio together and so we'll be bringing that up as you might imagine determine TX says will probably call. It the targeted panel those are already reimbursed at somewhere between 2500 $3000. So that'll be an additional revenue stream as we enter Q3 of next year for us as we bring in patients who might be.

Eligible for Io, but also have to make a decision on the physicians do between targeted therapy Nio will run both of those in conjunction and that's the market voice Partner'll, we're hearing that they want both okay. So will become that one.

The lab and Sir all that question on who needs to get Ian Tennessee, So with the Big panel that's the advice in the two thousands range.

Dnb question answered.

And then you will be next check already from that same sample you'll get your time I'll resolve and then you had the usual Egfr add cross also so with a single that support the doctor will be able to decide should I start targeting Tennessee should I give immune penalty or should I, just think that chemotherapy. That's division that's our vision. So.

That's great anyway, congratulations on all the progress thank you very much.

Thanks, Bruce we appreciate it.

Ladies and gentlemen, we have reached the end of the question and answer session and I'd like to turn the call back to Ron Andrews for closing remarks.

Yeah. Thanks to everyone I know has a long call. We appreciate your patience, we've got a lot going on here at <unk>, it's been exciting third quarter. We do that we have still lots of work ahead of us and we are working hard to deliver for both our stakeholders and shareholders. We look forward to continuing to update.

You guys are are growth.

And we just appreciate you joining our call and hope you all stay safe thanks, everyone.

This concludes today's conference you may disconnect your lines at this time and thank you for your participation.